PetroChina says in talks with Aramco for IPO deal

“PetroChina will study the opportunity (of the Aramco IPO) according to market conditions and national interests,” Petro China’s vice chairman Wang Dongjin.

Petro China, China’s largest oil and gas producer, says it is in talks with Saudi Arabia’s oil giant Saudi Aramco, including possible participation in its upcoming initial public offering that is expected to be the world’s largest, according to a report by the South China Morning Post.

Petro China’s vice chairman Wang Dongjin said he was recently informed of Saudi Aramco’s plan to go public. Wang made the comments in a post results press briefing after the company posted a 78% profit decline for 2016 that was in line with analysts’ expectations.

“PetroChina will study the opportunity according to market conditions and national interests,” Wang told reporters on Thursday when asked if PetroChina is interested to buy shares in the energy giant that manages the world’s largest proven conventional crude oil reserves.

PetroChina is also in talks with Aramco on investing into the oil refining and petrochemical project being built by PetroChina in Yunnan province that is expected to come on stream in June. The talks also included the potential deployment of PetroChina’s technology to enhance output of Aramco’s oil projects in Saudi Arabia.

PetroChina said 2016 net profit amounted to $1.15bn, down from $5.15bn in 2015, in line with its warning two months ago of a 70 to 80% fall.

The profit included a $3.55bn gain from the sale last year of a 50% stake in a firm that owns its gas pipelines linking northwest China to Central Asia. A pipeline assets restructuring gain amounted to $3.13bn was booked in 2015.

Revenue tumbled 6.3% to $232.2bn last year on the back of an 11.9% drop in the average oil selling price to around $38 a barrel, a 5.3% fall in oil output, and a 20% fall in the natural gas selling price.

Operating profit from oil and gas production plummeted 91% to $45mn yuan from 2015, offset mostly by a 700% jump in oil refining and chemical production profit to $5.67bn.

Wang expects this year’s international oil price to average somewhere between $50 and $58 a barrel. The Brent benchmark averaged $44 last year.

He said the higher oil price means the firm’s operating profit in this year’s first quarter could exceed $1.59bn, compared to a loss of $1.3bn in last year’s first quarter.

Asked if PetroChina will spin off its pipeline assets into a separately listed unit, Wang said it is restructuring assets worth some $72.56bn, and it will strive to “fully reflect” their market value after Beijing put a return cap on the nation’s gas pipelines at 8%.

The company said crude oil output is likely to decline 4.5% to 879mn barrels this year, after a 5.3% fall last year as high-cost fields were shut. It is aiming for a 1% increase in saleable natural gas output this year, down from a 4.6% growth last year.